Opposition, OPS oppose higher borrowing limit for FG

Both chambers of the National Assembly have raised the threshold for the Ways and Means advances by the Central Bank of Nigeria to the Federal Government from five per cent to 10 per cent of the previous year’s revenue.

However, this decision was opposed by the Organised Private Sector and members of the opposition parties in the National Assembly, as they kicked against the move.

Ways and Means are advances provided by the CBN to the Federal Government to cover revenue shortfalls in budget implementation.

The National Assembly also rescinded and re-enacted the 2024 Appropriation Act through an amendment bill sponsored by leaders of both chambers.

In the Senate, the increase in the threshold was achieved through the consideration and passage of a bill sponsored by its Leader, Senator Opeyemi Bamidele (APC Ekiti Central).

In his lead debate, Bamidele explained that the bill seeks to amend the CBN Act to increase the total CBN advances to the Federal Government.

He stated that the bill aims to help the government meet its immediate and future obligations due to the increasing need for funds to finance budget deficits and other expenses.

“The Central Bank of Nigeria’s Advances to the Federal Government are essentially loans that the bank provides to the government to help it meet its financial obligations. These advances are typically short-term and are expected to be repaid by the government,” he said.

Bamidele explained that the request to increase the threshold to 15 per cent of the previous year’s revenue was made to provide immediate funds to address budget shortfalls, finance essential government expenditures, maintain financial market stability, inject money into the economy, and support critical sectors like agriculture, healthcare, and infrastructure development.

This would also lower government borrowing costs compared to traditional borrowing methods.

During the debate, many Senators supported the amendment but argued that the 15 per cent requested should be reduced to 10 per cent.

It was recalled that from 2014 to 2023, the Federal Government collected a total of N30tn through Ways and Means from the CBN without National Assembly appropriation, prompting the Senate to set up an Ad-hoc committee for investigation.

The committee, headed by Senator Jibrin Isah (APC Kogi East), has yet to submit its report on the expenditure of the N30tn.

The amendment bill initially proposed a borrowing limit of 15 per cent, but several lawmakers cautioned that it should not exceed 10 per cent to ensure fiscal discipline.

Consequently, during a clause-by-clause consideration of the bill, the Deputy Senate Minority Leader, Abba Morro, moved for an amendment to substitute 15 per cent with 10 per cent in clause 2, which was supported by the majority of Senators.

Abdul Ningi proposed that the borrowing be limited to capital expenditure, but his motion was not seconded.

Meanwhile, both the Senate and the House of Representatives, during the emergency sitting, repealed and re-enacted the N35.05tn 2024 Appropriation Act through an amendment bill.

The Senate leader explained that the amendment was necessitated by observations made by the Directorate of Legal Services of the National Assembly on the previously passed 2024 Appropriation Act.

He specifically stated that the long title of the bill, clauses 1, 13, and 14, and the explanatory memorandum portion of the bill were meant for amendment, which was done expeditiously without changing the budget size.

After these amendments, both chambers adjourned plenaries to September 17, 2024.

During the debate on the Ways and Means advances at the House of Representatives, the opposition lawmakers voted nay in their numbers, but the Deputy Speaker, Benjamin Kalu, hit the gavel in favour of the ayes, saying, “The ayes have it. The bill to amend the CBN Act, 2007 read for the third time and passed.”

OPS, experts react

Reacting to the development, the National President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, said the move was counter-productive to combating inflation.

He said, “Raising Ways & Means is indeed counter-productive to fighting inflation as it increases liquidity which indeed fuels inflation. Also, it increases Nigeria’s debt servicing burden because each loan taken must be repaid with interest, however low.

“This leaves little resources for infrastructure and development programmes that will benefit the common man.”

Egbesola posited that it was evident that something was wrong with the nation’s fiscal policy.

He asserted, “It shows that the government of the day is not innovative in raising revenue through other noble means. It Is an indication that something is wrong with our fiscal policy. This is not the best for us now.”

Meanwhile, the National Vice President of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, said the borrowing mechanism has been abused over time by the government.

He said, “Ways and Means borrowing is usually obtained by the Federal Government from the central bank, which is the lender of last resort, to meet temporary, short-term, and emergency needs of the government. It was pegged at 5 per cent, but records have it that it has been abused over time, particularly by the last government of President Mohammadu Buhari.

“Ways and Means borrowing grew to as much as 70 per cent of the revenue without any ratification of amending it from five per cent to anything. The effect of Ways and Means borrowing on the economy is that it increases money in circulation, which in turn can generate inflation. So by formally increasing it from five per cent to 10 per cent, it means that it is going to give the government the leverage each time they borrow to increase money in circulation. However, if this government adheres to the 10 per cent borrowing, it will still be far lower than what the former President’s borrowing was.

“Because that was far above the 10 per cent, well I think that since the temporary borrowing is done under its financial discipline and is repaid on time, the effect may not be so much. But usually, Ways and Means borrowing increases money in circulation and can cause or aid further inflation.”

The Director of the Centre for Promotion of Private Enterprise, Dr Muda Yusuf, described the increase of Ways and Means to 10 per cent as realistic, not excessive, and more tolerable than the experience during the President Muhammadu Buhari administration.

“I don’t think it is excessive. I think it’s tolerable,” Yusuf said.

He added, “The current increase to 10 per cent pales in comparison to the previous regime’s Ways and Means spending. It was as high as 40 – 50 per cent.”.

He further explained how Ways and Means exist as a measure to plug spending gaps caused by seasonality issues in how the government gets revenue.

Additional reports by Arinze Nwafor, Oluwakemi Abimbola, and Daniel Adaji